Good news from the Supreme Court of Canada for injured victims of underinsured drivers

by Mark Raftus

What is SEF44 coverage?

In an article and video on the McKiggan Hebert website John McKiggan discussed how the SEF44 Family Protection Endorsement works. But a recent decision from the Supreme Court of Canada has made some important rulings that impact how SEF44 coverage can be used to protect you and your family.

Sabean v Portage Mutual Insurance Company

On January 27, 2017 the Supreme Court of Canada provided some good news for collision victims of underinsured drivers. In the Sabean v Portage Mutual Insurance Company decision, which arose out of a Nova Scotia car crash, the Court found that certain future income replacement benefits received by a collision victim should not be deducted when determining the eligible amount of SEF44 benefits payable. Thereby leaving more compensation in the hands of the collision victim.

This article discusses what SEF44 coverage is, how it works and precisely how the Sabean decision is good news for collision victims.

Underinsured and uninsured driver coverage

SEF 44 coverage may come into play when making a personal injury claim against a car owner/driver with low or no insurance coverage

If you suffered injuries in a collision, the at-fault driver is responsible to pay you compensation to make you whole again at law. Some types of compensation [damages] you can claim are past and future loss of income, the cost of your past and future medical care expenses, damages to reimburse for the expense of hiring housekeeping help and compensation for your pain and suffering.

The insurance company of the at-fault driver may agree to provide this compensation as part of a negotiated settlement. If the parties cannot agree to a settlement, then a court can order compensation following a trial.

In Nova Scotia, car owners/drivers are required, by law, to have at least $500,000 in insurance to pay for injuries or damages caused by the car owner/driver.

However, in cases where there are serious injuries (or a number of people have been injured) the policy limits may not be enough to fully compensate everyone for the injuries and damages they have suffered. If the injuries suffered by the collision victim are significant the collision victim’s compensation entitlement could easily exceed the limits of the at-fault driver’s insurance policy.

In the worst case scenario, the at fault driver may have no insurance at all. Often the at-fault owner/driver does not have significant savings or assets making collecting further compensation virtually impossible.

Safety net

SEF 44 coverage is essentially a “safety net” that provides a collision victim some protection against under-insured drivers (as long as the victim has purchased the SEF 44 endorsement under their own auto policy).
What is the SEF44 Family Protection Endorsement and how does it work?

SEF 44 coverage is also known as the Family Protection Endorsement. The essence of the endorsement is that the insured person is protected from the risk of being injured by an inadequately insured motorist. It protects both the named insured and their immediate family (spouse and dependents) when an underinsured or uninsured driver causes a collision resulting in serious injuries and a high compensation award.

Extra coverage

SEF 44 coverage is not part of the standard form auto insurance policy. It is not mandatory that insurance companies offer this coverage. However, most insurance companies do offer this coverage for a small extra premium. It is a small price to pay for the peace of mind that SEF 44 coverage provides. When SEF 44 coverage is purchased, it covers the named insured and their immediate family for a contracted amount and often up to the same coverage amount that was purchased for liability protection if they had caused a collision and injured someone else.

Excess coverage

The Family Protection Endorsement is, however, considered to be “excess” coverage. That means SEF44 coverage is only triggered when the at-fault driver’s insurance policy limits are lower than the injured person’s SEF44 policy limits.

SEF 44 coverage will be activated upon a claim being made to the insurer for its coverage and it will only cover the value of the claim over the amount of the at-fault driver’s insurance policy and up to the limits of the collision victim’s insurance policy.

It is very important to remember that SEF 44 coverage is excess coverage only and it does not stack the collision victim’s available insurance coverage limit on top of the at-fault owner/driver’s insurance policy limit.

A simple example

To help clarify this important distinction, please consider this example:

The injured collision victim wins at trial and the court orders the defendant to pay $2 million in compensation. But the at-fault driver’s auto policy limit is only $500,000.

What is the amount of SEF44 coverage available if the collision victim’s SEF44 policy is for coverage of $500 000? Coverage of $1 million? Coverage of $2 million?

  • If the collision victim has SEF 44 coverage of $500,000, the victim’s insurance company would not pay any additional money because the victim’s policy limit is the same as the at-fault driver’s policy limit. The $500 000 is not added to the at-fault driver’s limit. In this case the victim loses $1.5 million of their award (unless they can recover assets from the at-fault driver).
  • If the collision victim has SEF 44 coverage of $1 million, the injured victim’s insurance pays the difference between the at fault driver’s policy limits ($500 000) and the injured victim’s policy limits ($1 million). The victim’s insurance company would pay an additional $500,000 that was not paid by the at-fault driver’s insurance company. In this case the victim loses $1 million of their award (unless they can recover assets from the at-fault driver).
  • If the collision victim has SEF 44 coverage of $2 million, the victim’s insurance company would pay an additional $1.5 million to cover the difference between the at-fault driver’s policy limit and the victim’s policy limit. Only in this case would the victim be fully compensated.

Most SEF44 endorsements in Nova Scotia are for $1 million dollars, the typical policy coverage amount for liability if a driver injured another driver. The more SEF44 coverage purchased, the higher the premium to be paid.

Can the SEF44 insurer make any additional deductions when determining the victim’s entitlement?

Unfortunately, yes!

Remember, SEF44 coverage is excess coverage. In section 4 of the SEF44 endorsement policy it states that to determine the amount payable first the total damages entitlement needs to be ascertained – which would be by agreement or by Court award.

Then deductions are to be made from what the victim received [or was entitled to receive] including amounts paid by the at-fault driver’s insurer, from any bonds or cash received from the at-fault driver, from any Section B no-fault medical and wage replacement benefits received from the victim’s own auto policy, from any applicable Worker’s Compensation Act benefits received as well as from “any policy of insurance providing disability benefits or loss of income benefits or medical expense or rehabilitation benefits.”

I have emphasized the last deduction in quotation marks as it was the focal point of the Supreme Court of Canada’s recent decision in the Sabean case.

The Sabean decision and why it is good for collision victims

On January 27, 2017 the Supreme Court of Canada issued the Sabean v Portage Mutual Insurance Company decision. The claim arose out of a 2004 car collision which happened in Nova Scotia. In 2013 a Nova Scotia jury awarded the collision victim Sabean $465 000. For a number of reasons the amount the at-fault driver’s insurer paid out was $382 000 leaving a shortfall to the victim of $83 000. The victim claimed for the shortfall under his SEF44 policy endorsement through his insurer Portage La Prairie Mutual Insurance Company.

Given his injuries, the victim also applied for and was granted CPP disability benefits which would continue into the future. Portage took the position that the future CPP disability benefits should be deducted when determining the SEF44 amount payable given the CPP disability benefits were benefits received from a “policy of insurance”.

The Trial Judge instructed the jury not to deduct the CPP disability benefits as he determined legally they were not benefits received from a policy of insurance. The Nova Scotia Court of Appeal disagreed and concluded that CPP benefits should be deducted because the payments arose from a policy of insurance under the SEF44 endorsement wording.

The Supreme Court of Canada considered all arguments and ruled that an average person applying for additional, optional insurance coverage that the SEF44 provides would understand a “policy of insurance” to include an optional, private insurance contract and not a mandatory, statutory scheme such as the CPP.

Clear language: Common sense

The Supreme Court ruled the insurer could not rely on its specialized knowledge of the law to advance a contractual interpretation that went beyond the clear words of the policy. The Court stated the contract should be read with clear language giving words their ordinary meaning thus determining CPP disability benefits were not payable under a policy of insurance.

Conclusion – Good News …and Remember to Buy Appropriate Insurance!

This decision of the Supreme Court of Canada is good news for collision victims as it will result in one less deduction occurring when determining the amount payable under the SEF44 endorsement thereby leaving more money in the hands of the collision victim.

When purchasing your auto insurance it is very important to ensure you have appropriate coverage for your needs which should include the purchase of the SEF44 endorsement. The higher the coverage you can purchase given your means the better. If you are struck by an at-fault driver with low insurance limits and you have significant injuries and are entitled to high compensation you want to ensure there will be funds available to take care of you moving forward.

The legal issues involving serious personal injury claims and how various insurance coverage issues impact the claim can be complex. This office has dealt with the SEF44 endorsement several times over the years and currently has a large claim set for trial dealing with this very issue.

When seeking compensation for serious injuries through the at-fault driver’s insurance policy or your SEF44 endorsement, it is important to remember that insurance companies have strong incentives to not pay the full value of your claim. You should consult a Nova Scotia personal injury lawyer to fully understand your rights.

Want more information?

We have been representing victims of serious personal injuries for more than 27 years. John McKiggan wrote Crash Course: The Consumers Guide to Car Accident Claims in Nova Scotia to help educate car accident victims and their families so they can have a better chance of receiving full and fair compensation.

Crash Course is available for sale on Amazon. All sale proceeds go to charity.  But if you live in Atlantic Canada, you can get a free copy of the book by contacting us through this blog, or by calling toll free in Atlantic Canada at 1-888-510-3577 .

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